Question

Need help with completing the table below with the amounts you would have if you invested $1,000 for at 5% interest with simple interest and with interest compounded annually. Round to the nearest cent.
Compound Interest
1 year $1050
2 years $
3 years $
4 years $
5 years $

Answer 1

I know that for the first year it's $1050

Answer 2

Well, the formula for this is Interest = Price * rate * time. So, I is what we need to find. So, I = (1,000) (0.05) (1) is 50. So, for year 1, it is 1,050. Using the same formula, can you figure out the rest?

Answer 3

$1100 for year two?

Answer 4

Yes. Good Job!

Answer 5

And then $1150

Answer 6

Yes. Just keep using that formula and you should get the rest.

Answer 7

wait but wouldn't this be it for simple interest? We are looking for compound?

Answer 8

hmm.

Answer 9

Well, for compound interest, Amount = Principal * (1 + rate / number of times per year) ^time

Answer 10

You see because I have the values we are getting for the simple interest table, and it's saying I got those values correct. But what I'm trying to do is complete the second column which is titled compound interest values.

Answer 11

That's what I did before but it said my values were incorrect, Can I show you what I did?

Answer 12

Sure.

Answer 13

Ok, so for the first year I did 1000(1+.05/1)^1

Answer 14

I got the fist value which is correct 1050

Answer 15

But for the remaining years here's what I did: 1000(1+.05/2)^2

Answer 16

But I'm assuming my substitution is wrong

Answer 17

Do you happen to see what I'm doing wrong?

Answer 18

are you sure you typed it in right?

Answer 19

Oh! Perhaps you did not do the order of operations. See, do the (1 + 0.05/2) first, then the ^2, and then the 1,000? When doing that I got, 1,050.625.

Answer 20

That's what I got too

Answer 21

It said my answers were wrong. Do you think it could be the rounding to the nearest cent?

Answer 22

I put in 1050.62

Answer 23

Perhaps so. Then it would be 1,050.625 = 1,050.63

Answer 24

That's what I had originally put but it said I'm wrong

Answer 25

Maybe I'll try emailing my instructor

Answer 26

Oh wait. you said you put in 1,050.62. When you round up its .63 not 2?

Answer 27

Ok and for the next years would these be correct then?
$1050.84
$1050.94
$1051.10

Answer 28

They all came out to being wrong when I originally put them in

Answer 29

For year 3, I got 1,033.61...? Double checked it as well.

Answer 30

See if you get that.

Answer 31

I'm not getting that, I must be putting it in wrong

Answer 32

Are both year 4 & 5 wrong as well?

Answer 33

OH. DANGIT. SORRY that's me.

Answer 34

I forgot to change the exponent to 3. So, yes. 1,050.83 is correct =).

Answer 35

Do you mean for year three?

Answer 36

yes.

Answer 37

Because then wouldn't the values just be decreasing and then increasing?

Answer 38

From 1033.61 for year 2 to year 3

Answer 39

I guess thats what it is?

Answer 40

So do the rest of the values for year 4&5 seem correct?

Answer 41

um year 3 is 1,050.83, Year 4 is 1,050.94, and year 5 is 1,051.01. So yes.

Answer 42

it's still incorrect when I put it in, but thank you!

Answer 43

I'll email my instructor and figure it out

Answer 44

Your Welcome! Msg me if you need help again! =)